Is a Transitional Deal Good for Brexit?

With the Brexit negotiations in full flow, Britain is looking for a way to make the transition away from the European Union run as smoothly as possible while ensuring that Brexit happens unimpeded. There are two possible exits. The first is a clean cut that will come into effect on 29th March 2019. The second option is to negotiate a transition deal that will allow Britain to disengage with the EU over a designated period of time. Here on The Bruges Group we have examined how trade can successfully continue outside of the Single Market. It is just a case of how we get there. In this article we look at the advantages and disadvantages of a transitional deal.

For a Transitional Deal

A big concern amongst some leave voters is that Britain is heading towards a cliff edge scenario where no agreement or deal is reached. Many political and business commentators believe that this would leave Britain in a precarious position as all EU laws and regulations would suddenly cease. It is estimated that over 700 treaties have to be renegotiated, ranging from the airline industry to Britain’s nuclear agreement (Euratom), with the EU. With less than two years till the Article 50 deadline there is a strong argument that it isn’t feasible to negotiate every deal in time. This could leave many UK businesses in difficult positions, as they have to suddenly change from one set of regulations to another.

British trade minister and prominent leave advocate Liam Fox has pushed for a transitional deal. The Irish Times reported that Fox told Andrew Marr that a deal of around two years was necessary to give businesses the chance to adapt. He is quoted as saying: “I want to leave the European Union at the end of March 2019. Now once we have done that, once we have fulfilled our promise to the British people, we can look to see what we are going to do in terms of making that a smooth transition… whether that’s 23 [months], whether that’s 25 [months]." The trade minister reassured leave voters by stating that the transition period would have a limited time scale.

Against a Transitional Deal

There are valid fears that a transitional deal could be used by remainers to keep Britain locked into many EU regulations including the Single Market and Customs Union. Business Insider predicts that a transitional deal could be based on the EEA model which would allow free movement of citizens and require Britain to remain under the European Court of Justice. With Britain replicating the EEA model, remainers in the government could use it as a base to push for a permanent EEA status.

The British Government recognises that the British public voted for a clean cut. FXCM notes that May has clearly laid out the terms of Brexit: “Let me be clear. We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice.”

A transition deal could also hinder Britain’s ability to make trade deals with nations outside of the EU. If Britain cannot negotiate trade agreements during the transition, due to EU regulations, businesses in the UK would face even longer uncertainly. For Brexit to be successful. Britain must be able to trade globally without EU interference.